It's Super Gold Sunday!

By: Chris Vermeulen | Sun, Feb 6, 2011
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While Ben Bernanke says we are not seeing any inflation, I think most of us know that is a load of BS as other countries like Egypt see food prices surging. Over the past couple years everyone has been talking about how inflation will soon start and that has been one of the main driving forces for higher precious metals prices.

As we all know the market does the opposite as to what the majority of investors are doing. And while everyone has been buying metals in anticipation of inflation, I find it amusing how inflation for the first time is clearly presented on TV (Egypt issues) and we see gold and silver trading lower than they were a month ago. Seems like the buy the rumor sell the news lives is playing out. But the question everyone is starting to ask is how far will the metals correct?

Personally, I do not think they will drop much further but I do think it's going to take 6-8 months before we see new highs in both gold and silver. They have had a nice run but now it looks as though they may cool off for a while. We could see some strength in the dollar for a little while and that should keep some pressure on metals even though inflation is clearly starting to show up around the world. Then the metals should start to climb the wall or worry again.

Below I are my updated charts on gold, silver and the gold miners index. Not much has really changed from last week analysis other than both gold and gold miners are getting deeper into a resistance level forming a bear flag pattern.


Gold Daily Chart

Gold is working its way up into a key resistance level and forming a possible bear flag.

Gold Daily Chart


Silver Daily Chart

Silver has been testing its key resistance level for a few days. It is normal to see silver push the limits and make larger moves simply because it is thinly traded and much more volatile. It looks ripe for a pullback at this area.

Silver Daily Chart


Gold Miners Daily Chart Index

Gold stocks have put in a nice bounce from the strong selling in January. As it pushes up into a resistance level it's starting to look more attractive as a short play also. I still think the market has a couple more days to upward/chop before metals see possibly another thrust down, but that also depends on what the dollar does this week. The dollar does look ready to rally this coming week and that will put pressure on metals.

Gold Miners Daily Chart


Sunday Night Super Gold Conclusion:

In short, I'm an still neutral to bearish on gold, silver and gold stocks. Last week's report showed these same patterns and it takes time for patterns to mature. The market always tends to take longer than we think to start a move.

At the moment I am waiting for metals to form a low risk entry point which looks to me like we could take a short position for another downward thrust in the market unfolds as the charts are hinting to before we buy gold for another long term hold as inflation rises.

 


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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
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Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

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He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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